Panel borrowing millions to pay Saints

this is a discussion within the Saints Community Forum; Panel borrowing millions to pay Saints
But no one's sure how state will repay debt
Wednesday, June 29, 2005
By Bruce Eggler
Staff writer
The Superdome Commission swallowed hard Tuesday and agreed to borrow $10.5 million to meet pressing expenses, ...

Panel borrowing millions to pay Saints
But no one's sure how state will repay debt
Wednesday, June 29, 2005
By Bruce Eggler
Staff writer
The Superdome Commission swallowed hard Tuesday and agreed to borrow $10.5 million to meet pressing expenses, including millions due to the New Orleans Saints next week, with no clear idea of where or when it will find the money to repay the debt.

The commission voted 5-0, with two members absent, to issue $10.5 million in "revenue anticipation notes," borrowing from its anticipated future revenue to meet its immediate bills.

But unless the Legislature bails out the commission with a major new revenue source, or the Saints agree to give up millions of dollars in annual subsidies that the state -- acting through the commission -- owes to them, Dome officials admitted they were simply postponing the day of financial reckoning.

There is little prospect that the commission's revenue in the fiscal year starting July 1 will be large enough to cover all its new obligations, let alone repay the $10.5 million it agreed to borrow Tuesday or the $7 million it borrowed a year ago from another state agency to cover the state's 2004 payment to the Saints.

Even with the new cash, the commission plans to pay only $950,000 of the $4 million it owes this year in insurance premiums on the Dome and New Orleans Arena, although it will pay off $2.5 million in premiums it still owes from last year.

The commission's financial plight was eased slightly by a recent upsurge in revenue from the 4 percent tax it levies on hotel rooms in Orleans and Jefferson parishes, and it stands to gain some money after slot machines start operating at the Fair Grounds.

But the slots money won't start flowing for more than a year, and the commission is still millions short of the money it owes to the Saints and the New Orleans Hornets under the agreements negotiated by the state to keep the Saints and bring the Hornets here.

More than half of the $10.5 million will be used to complete the $15 million payment the state owes to the Saints next week under the 2001 deal that committed the state to pay the Saints $186 million over 10 years. The state's obligation grows to $20 million a year in 2006 and 2007 and to $23.5 million a year in 2008, 2009 and 2010.

Another chunk of the money will go to the Hornets, to whom the state owes $2.3 million: $1.6 million for not having sold the naming rights to the arena and $675,000 for the team's failure to hit attendance figures specified in its contract.

Another $250,000 is dedicated to improvements at Zephyr Field, and fees and interest on the loan total about $650,000.

Meredith Hathorn of Foley & Judell, the commission's bond attorneys, said the commission will get its money from sale of the notes Friday. The Saints and Hornets payments are due Tuesday.

Merrill Lynch will buy the notes, which will pay interest of 4.75 percent. The principal is supposed to be repaid starting in July 2006, but Hathorn said she expects the debt will be refinanced by then to give the commission more time to find the money. The commission will use some of the $10.5 million to pay the interest on the debt.

Unreal. So the SD Commission, already $7 million in debt from last year's missed payment, and currently only generating enough revenue to cover 30% of this year's liability to the Saints is going another $10.5 million into debt, which it plans to pay off with future income (which will inevitably be not enough to even pay the Saints let alone repay the loans). This is a great plan. Next year the Dome Commission is going to have to borrow $15 or $20 million. Stupid, stupid, stupid.